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billoutfrontforum -> RE: Any suggestions for my site? (6/23/2006 22:43:16)
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quote:
I have always wondered about stock brokers (& horse racing tipsters for they are in the same business). No offence to Bill meant here by the way.
I'm not a stockbroker, but I was at one time.
I'm a licensed, registered investment advisor. I went from public accounting to Merrill Lynch, in 1986, as a stockbroker. At that time, and possibly still, their training program was regarded as the best Wall Street had to offer. It took about three days before, to my horror, I realized what this job informally called "stockbroker" really consisted of.
Stockbrokers are glorified salespeople; that's it. They are not taught to be money managers.
In addition, advisors are fiduciaries; brokers are not.
Brokerage company Edward D. Jones is straightforward about what a stockbroker is, on their website. See the FAQ "Is the work difficult?"
The psudonyms "financial counselor", "financial advisor", "account executive", "investment agent," and others that brokerages call their brokers are to look pretty and be confusing on business cards.
They are taught the bare bones of investing basics and learn to repeat features and benefits like chanting mantras. Features, benefits, close. That's it.
The way they are compensated doesn't help the investor's cause either.
When I was a broker, we made either less than $40,000 or more than $65,000. There was no middle ground because they pay brokers a retroactive, and higher, percentage of revenues as revenues rise over the year.
For example: The broker makes, say, 20% of sales (commissions) up to $199,999. That's $40,000 for the salesman.
When he hits $200,000 he gets 37.5% on the entire $200,000. That's $65,000.
And then they have another carrot to chase at $250,000, $300,000, and so forth.
The low producing brokers were treated horribly disrespectful by management and the churners like royalty. It's all about profits...for the brokerage.
Also, brokers get paid higher commissions on packaged products. They face situations daily as in this example:
(1) Invest Mrs. Jones' $200,000 in a "so so" mutual fund that going to produce an $8,000 commission and a trail fee of 1% per year, or
(2) Invest Mrs. Jones' $200,000 in a balanced portfolio of stocks and bonds geared towards total return that will produce commissions of $3,000 and no trail fee.
It's a culture that seeks after sociopaths and rewards them handsomely for their dirty deeds.
It's pretty scary but it's just the way it is. Getting advice from the same people who receive the commission is a recipe for disaster.
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